By Jesmed E. Suma
Annual rice consumption in Sierra Leone – among the region’s highest per capita – amounts to some 550,000 metric tons. While self-sufficient in rice in the 1950s, and a rice exporter as recently as in the 1970s, Sierra Leone now imports 30 percent of this staple food. Our climate is generally favourable toward agriculture, and our 5.4 million hectares of Bolilands, mangroves, inland valley swamps, and riverine grasslands are very suitable for growing rice. Yet only one-fourth of these fertile, diverse lowlands are under cultivation.
One reason for this is that special concessions now enjoyed by rice importers give them advantage over rice growers which discourages private investment in local rice production. In any case, as noted in my recent article on poverty, importing rice is problematic because it drains our foreign exchange reserves, swells our balance of payment deficit, and leads to inflation.
What, then, can we do to remedy this situation? In the past, policymakers concentrated subsidies around the production level of the food chain. In this way they neglected, and even excluded from government assistance programs those who grow, process, package, transport and distribute rice. I, on the other hand, am persuaded that what is needed is a multi-pronged solution that encourages a culture of entrepreneurship – a subject too often missing in policy discussions about economic development. It is after all the entrepreneurial spirit that seeks to create new, innovative, and competitive businesses, without which there can be no sustainable economic growth. A case in point is the vivid income disparities between ordinary Sierra Leoneans and their expatriate counterparts: these are most often merely a reflection of the foreigners’ greater sense of enterprise.
THE SOLUTION:
I would like to see Njala University embody the motto, “Building Sierra Leone through Agriculture, Science and Education,” and become a regional centre of learning and innovation for the agricultural sector. It could do this by leading the way toward defining market-based approaches for carrying out the cost-benefit analysis needed to design effective incentives (or deterrents) for participation at critical points along the food production chain. It could also play a central role in building a framework for collaboration between entrepreneurs and policymakers committed to the rational planning and initiation of appropriate new agribusiness models. In comparison, the government’s role should be limited to promoting, facilitating and supporting the production and marketing of such collaboration and its by-products, as follows:
Strength locally-owned agribusiness:
The first step should be to identify local agribusinesses that are successfully growing rice, cassava, millet, and other food crops on a commercial scale; and whose ownership is at least 55 percent Sierra Leonean. The second step is to bring the identified companies together to come up with a system for determining their eligibility for soft government loans that match their current capital investment in rice production. (Because our goal is food security, ethanol producers should not be eligible for participation.) Companies like Arul, Marika Enterprises, and the poultry farm owned by a Sierra Leonean returnee from the United Kingdom has already invested in the rice growing business. Such companies, if they can document three years of viability and meet certain conditions, should be recognized, encouraged, and supported.
Each participating company should agree to double its rate of production in exchange for a corresponding increase in investment loans, for a maximum of $200,000, to be disbursed in increments of $50,000. The promise of disbursements should serve as an incentive to qualify for each installment payment, which should be made only when the relevant conditions have been met. Participating companies should also agree to set appropriate target objectives for production, employment, loan repayment, and taxation and submit quarterly reports for audit.
Loans should be processed and managed by reputable commercial banks for whom the opportunity to hold interest-free deposits of agricultural development funds should serve as an incentive to make timely disbursements to qualified agribusinesses and to respect agreed-upon interest rate ceilings. Without fluctuations in the inflation rate premium (commonly a large percentage of nominal interest rates for loans), participating banks may impose default and maturity date premiums, as well as transaction and loan monitoring costs, which should significantly lower interest rates from approximately 20 percent to below seven percent. Participating banks should be responsible for the process of underwriting loans, and for ensuring that they are paid back in full and in a timely manner. By halving the default risk premium, the government should be able to choose to provide additional guarantees for at least 50 percent of each loan, subject to annual review, which should further bring down interest rates.
Government policy should limit rice orders for the police, military, and other public agencies to local producers. This should encourage local producers to increase their inventory.
Introduce incentives to grow rice:
Some of this may presumably already be in place. All equipment and supplies used in rice cultivation and production should have duty waivers and all rice producers should receive tax concessions, e.g., a five-year corporate tax holiday. The government should sponsor and assign field technicians to provide hands-on guidance to agribusinesses in promoting, developing, producing, and marketing their products.
Encourage rice importers to invest in local rice production:
A government plan should be developed to curb rice imports within five years. The plan should limit the granting of licenses so that no more than two importers are operating in the country at any given time. Eligible importers should have agreed to invest increasing percentages of their annual profits in the cultivation of rice in Sierra Leone (e.g., from 25 in Year One to 75 percent in Year Five).
If importers meet the above criterion, their licenses should be renewed for one year. If they do not, they should pay a fine that is equivalent to the estimated percentage of the profit for that term; and risk losing their license. (As I learned during my experience with Sumatu International, rice importers – some of whom import three or four shipments each year – each typically clear at least $500,000 for every 12,500 metric tons they deliver. As in Guinea and Nigeria, where I am told that foreigners are either banned or discouraged from importing rice, Sierra Leone should issue import licenses only to nationals.
After an importer has held a license for one year, they should forfeit half of their duty concessions and be required to pay hitherto waived government fees. Annual measurement of expected gradual increases in local rice production should guide decreases in import quotas.
Foster local cooperation, create Agric Economic Clusters:
In order to make up for past policies that, as noted earlier, defined too narrowly who could receive government assistance and support programs, I propose the creation of agricultural economic clusters – groups of closely-related, complementary businesses operating along the food production chain within a particular region. Such clusters, because they would include rice growers, suppliers of rice inputs (like seeds and fertilizers), millers, transporters, and market sellers, should be included in national agricultural development programs; and cluster members should be eligible for soft revolving loans.
As a complement to the clusters, I also propose the creation of an Agribusiness Enterprise Training Program at Njala University. This should be an intensive, comprehensive course lasting between three and six months, which would introduce young students to the study of agro-economics, the use of economics methodology to implement decisions made by agricultural producers, domestic and international food product packaging and marketing; planning and launching an agribusiness; and the development of secondary products from ordinary foodstuffs which meet international standards.
Program graduates should be assigned to coordinate agribusiness cluster activities; liaise within among cluster businesses; identify local resources and help develop innovative approaches for reducing costs; and help banks supervise and monitor loan disbursements and repayment, which should certainly improve loan repayment rates.
In addition to monthly stipends, these cluster field agents should receive quarterly bonuses, but only if they fulfill specific performance requirements, including submitting weekly reports. While I am concerned about the work ethic of young Sierra Leoneans, I do believe that such an arrangement should provide an incentive for young field agents to work hard and reach useful career objectives. Within five years of completing the program, graduates should be ready to use the experience they have gained as cluster field agents and to begin functioning as independent agribusiness operators or consultants.
Clusters should prove to be a driving force for local collaboration, which in turn should encourage entrepreneurship and prove effective in spurring both participating businesses to become more competitive and productive and cluster regions to experience a growth in the rate of new business formation. Being broad-based and inclusive, clusters should also foster new ways of thinking about economics and they should inspire local efforts to achieve economies of scale as a central value of our development planning. No less importantly, the cluster ethos should popularize new development approaches conducive to the more efficient use of existing resources and a resulting improvement in export performances.
Stimulate economic innovation and build infrastructure:
The most urgent tasks are thus: 1) locate and repair or replace depleted infrastructures, especially secondary roads, which are inhibiting farming communities’ access to each other and to local markets; 2) come up with a formula for gauging which agricultural communities should receive priority attention, based on estimates of their potential contribution to the national economy; 3) explore and evaluate the possibility of cultivating improved, high-yield varieties of rice, and of adopting new farming methods; 4) select potential sites to serve as strategic market centres in each agricultural economic cluster, for the purpose of sharing crop storage and rice milling facilities; and 5) identify water resources available to each cluster, for use in irrigation and other agricultural development schemes.
In the interest of sustainability, chiefs should be involved in and be held responsible for every one of the above activities from planning to completion; and all construction and cultivation tasks should be allotted to village-based contractors as part of a fair bidding process. Before successful bidders are able to lease the site in question, they should undergo training on how to run these market centres as businesses; and they should agree to pay monthly rent to the government after a period of grace, with an option to buy (the charging of rental fees, even if these are negligible, should foster a sense of ownership and therefore responsibility for government-owned assets).
Property should be withdrawn from any lessee who fails to maintain it or to make timely payments. We should however expect that if farmers consider that cluster services are useful they will be motivated to pay for them. What is most important is to allow market forces time to regulate economic activities, and to ensure efficiency and sustainability.
One valuable consequence of the programs I have suggested here should be that as loans are repaid, the government will find that it has accumulated moneys that it can eventually place into a revolving fund for use in scaling up relevant activities in different parts of the country and in other sectors.
Jesmed F Suma is a policy research analyst and the Executive Director of Sierra Leone Policy Watch Inc. an independent public policy think tank in Sierra Leone and the US. He also the President and CEO of Business Research and Investment Management Corporation (BRIMCO) a US based corporation. The views contained in this article are his and do not represent those of the organizations he works for.Comments or questions at welcome to JFSuma@BRIMCOConsulting.com.
